Answered: 1. Prepare an income statement for the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,050 kayaks and sold 800 at a price of $1,050 each. At this first year-end, the company reported the following income statement information using absorption costing.


Sales (800 × $1,050)	$	840,000
Cost of goods sold (800 × $500)		400,000
Gross margin		440,000
Selling and administrative expenses		230,000
Net income	$	210,000

Additional Information

Product cost per kayak totals $500, which consists of $400 in variable production cost and $100 in fixed production cost—the latter amount is based on $105,000 of fixed production costs allocated to the 1,050 kayaks produced.
The $230,000 in selling and administrative expense consists of $75,000 that is variable and $155,000 that is fixed.

Required:
1. Prepare an income statement for the current year under variable costing.
2. Fill in the blanks:

Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,050 kayaks and
sold 800 at a price of $1,050 each. At this first year-end, the company reported the following income statement information using
absorption costing.
Sales (800 × $1,050)
Cost of goods sold (800 x $500)
Gross margin
Selling and administrative expenses
$ 840,000
400,000
440,000
230,000
Net income
$ 210,000
Additional Information
a. Product cost per kayak totals $500, which consists of $400 in variable production cost and $100 in fixed production cost-the latter
amount is based on $105,000 of fixed production costs allocated to the 1,050 kayaks produced.
b. The $230,000 in selling and administrative expense consists of $75,000 that is variable and $155,000 that is fixed.
Required:
1. Prepare an income statement for the current year under variable costing.
2. Fill in the blanks:
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Fill in the blanks:
The dollar difference in variable costing income and absorption costing income =
units
fixed overhead per unit.
< Required 1
This is a numeric cell, so please
enter numbers only.

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